State of Vermont

Green Mountain Care:

A Comprehensive Model
for Building Vermonts
Universal Health Care System

Submitted by Governor Peter Shumlin to the Vermont State Legislature

December 30, 2014

Acknowledgements
This report is the culmination of several years of work by the staff of the health reform
office in the Agency of Administration. Special thanks go to Robin Lunge, Director of
Health Care Reform; Michael Costa, Deputy Director for Health Care Reform Financing;
Devon Green, Special Counsel for Health Care Reform, and Marisa Melamed, Executive
Assistant, for their dedication and tireless work, including nights, weekends, and
holidays.
Thanks also go to Anya Rader Wallack for assisting with the writing and editing of this
report, as well as her many diverse contributions to this project over the years. This
report would not have been possible without the assistance of our contractors and
actuaries thank you for always prioritizing what we needed and being fast and
responsive. And, thank you to the members of the Governors Business and Consumer
Advisory Councils for your time, candor, and thoughtful contributions to one of the most
challenging public policy issues faced by every state at this time.

PETER SHUMLIN
Governor

State of Vermont
OFFICE OF THE GOVERNOR

December 30, 2014

Dear Vermonters:
Today we are releasing the Green Mountain Care financing report we developed that led me to
the difficult conclusion that now is not the time to move forward with a publicly-financed health
care system in Vermont. In the coming weeks we will be publishing additional materials from
our research on the website http://hcr.vermont.gov/library. Vermonters will have access to all of
the analysis that we used to come to the difficult decision we made.
I hope this report gives us a common understanding of the detailed assumptions and facts needed
for the work we must do over the coming legislative session to continue long-lasting, meaningful
health care reform in Vermont. I also hope these materials provide a foundation for future
efforts to usher in a publicly-financed health care system that is more equitable than the one we
have now, when the time is right.
Listening to the public discussion following the announcement that we will not move forward
with public financing of health care in Vermont at this time, I have been struck by how many
people on both sides of the debate have mistakenly declared that this decision means our work on
health care reform is finished. Let me be clear: We will continue to move forward reforming the
health care system in Vermont. We will do so because we must; as a state, we simply cant
afford not to. If health care costs continue to grow as they have, they will consume every other
opportunity for economic improvement for businesses, families, and individuals.
I have supported a universal, publicly financed health care system my entire public life, and
believe that all Vermonters deserve health care as a right, regardless of employment or income.
Our current way of paying for health care is inequitable. I wanted to fix this at the state level, and
I thought we could. I have learned that the limitations of state-based financing limitations of
federal law, limitations of our tax capacity, and sensitivity of our economy make that unwise
and untenable at this time.
109 STATE STREET THE PAVILION MONTPELIER, VT 05609-0101 WWW.VERMONT.GOV
TELEPHONE: 802.828.3333 FAX: 802.828.3339 TDD: 802.828.3345

We must continue to make great strides, as a state, in addressing some of the other flaws in our
health care system unsustainable costs, funding priorities that are misaligned with promoting
good health, and a complex and inefficient system of service delivery and record-keeping. I
commit myself to working with the legislature, providers, advocates, and everyone willing to
engage to continue to make meaningful improvements to Vermonts health care system and to
improve access for those Vermonters who are left out today.
We must continue to pursue the goals of reducing the number of uninsured Vermonters and
support high-quality primary care for all Vermonters. We must strengthen the Green Mountain
Care Board so we have better path to long-term cost containment. We must implement an allpayer payment system that is transparent and fair, rewards quality not quantity, and reduces the
cost-shift to private payers. We must continue build-out of a cutting-edge system of health
information exchange, with appropriate oversight to assure that it meets the needs of Vermonters
and their health care providers and invests our dollars wisely.
My goal as Governor, what brings me to work every day, is helping make life better for all
Vermonters. That means working together to focus on what we can solve, not fighting over what
we cannot. While I do not believe the time is right for moving Vermont to a publicly financed
universal coverage system based on what we learned, I believe even more strongly that together
we must press forward.
I know many Vermonters are disappointed my decision not to pursue public financing. I know
others are mistrustful of any reform following years of contentious debate about health care both
nationwide and here in Vermont. But we cant allow disappointment or cynicism to cloud the
areas where consensus exists or grind to a halt reforms that we all agree must happen. There is
too much at stake for our economy, our kids and our future to do anything else.
Sincerely,

Peter Shumlin
Governor

Table of Contents

Executive Summary
Chapter 1:

Background: Why Green Mountain Care?

Chapter 2:

Who would be covered?

11

Chapter 3:

What benefits would be covered?

16

Chapter 4:

How would the program operate?

20

Chapter 5:

Who would provide health care services and how would they get paid?

29

Chapter 6:

What would GMC cost and how would we pay for it?

32

Chapter 7:

How would public financing impact Vermont businesses and families?

48

Appendices
A. Population Information
B. GMC Benefits Information
C. Microsimulation Modeling
D. Actuarial Analysis and Modeling
E. Waivers
F. Financing Background Information

Executive Summary
On December 17, 2014, after receiving our recommendations on the policy choices necessary
to implement public financing, the Governor announced that he could not recommend that the
legislature move forward with public financing at this time. Given the current economic climate
and other factors, the risk of economic shock is too high. The policy choices that are necessary
such as a transition plan for small businesses that this report will show to be absolutely critical
are not affordable at this time, and lower-cost alternative plans that strip out these policy
features were not acceptable to the Governor. The Governor also indicated, however, that we
would provide our complete report on Green Mountain Care coverage and financing to show
the promise of Green Mountain Care as a future step and to provide complete information to
the public regarding the analysis.
Act 48 of the 2011 legislative session established Green Mountain Care (GMC) as a universal,
publically financed health coverage program for all Vermonters. The law required Vermonts
Executive Branch to develop a plan for financing and operating GMC. This report fulfills that
mandate and describes the proposals considered by the administration for GMC design and
implementation.
In developing our recommended design of GMC, we kept in mind six central goals:

Cover all Vermonters;

Provide coverage that is comprehensive;
Simplify the system for Vermonters and their health care providers;
Provide for excellent customer service and capable administration;
Spread costs fairly;
Ensure that the program is financially sustainable for Vermont and does not hurt our
economy.

Chapters in the report describe how GMC, if approved by the legislature and the federal
government, would address these goals and:

Replace employer and family premium payments with a fair and equitable system of
tax-based funding;
Pay for benefits that cover the needs of Vermonters and encourage healthy choices;
Guarantee health care cost control;
Pay health care professionals and organizations fairly while encouraging better
coordination of care and a stronger emphasis on keeping Vermonters as healthy as
possible;
Operate as a public-private partnership, maximizing the strengths of the private sector
to administer the program;

Interface with existing programs of universal coverage, such as Medicare, to assure that
those programs are maintained and protected.

Green Mountain Care would make Vermonts health care system more fair, equitable and
sustainable. GMC would:

Guarantee that all Vermonters have coverage, regardless of their income or employer
and that the out-of-state employees who commute to work at Vermont businesses have
access to coverage;
Fund coverage with a combination of an 11.5 percent payroll tax, which does not
include a preferred phase in over 3 years for small businesses, and income-based family
contributions, rather than premiums;
Cover a broad array of benefits, consistent with what most employers now cover;
Limit Vermonters out-of-pocket costs for care to an average of six percent of total
costs, equivalent to what state employees and teachers currently enjoy;
Simplify enrollment so that Vermonters go through one door, regardless of income, to
obtain coverage;
Change provider payment so that doctors and other professionals are paid for the
outcomes of their work, and not simply the volume of services they provide, and
innovative networks of providers are rewarded for managing overall costs and quality of
care;
Replace the funds generated by the current provider tax, employer assessment and
claims tax to ensure a transparent financing system without these types of hidden taxes;
Be governed by an annual process that determines a reasonable growth in health care
costs to support a high-quality health care system.

GMC is intended to cover all Vermonters, except those who have coverage from Medicare or
TRICARE (military coverage). We estimated that 519,000 Vermonters would be covered by GMC
in the first year of the program and 538,000 in the fifth year.
GMC would provide a wide array of benefits, consistent with what most employers provide
today and include primary, preventive and chronic care, urgent care and hospital services. GMC
would cover vision and dental care for Vermonters up to age 21, as required by the Affordable
Care Act. GMC would not cover long-term services and supports.
Under our proposal, cost-sharing in GMC would be limited to, on average, 6 percent of total
costs, meaning GMC would have an actuarial value of about 94 percent. Cost-sharing
requirements would be limited by an out-of-pocket maximum expense for all Vermonters,
unlike the coverage provided to state employees today.

GMC should operate through a public-private partnership between state government and a
designated entity1 with the ability to contract with providers, implement innovative payment
policy, contract with an out-of-state provider network, establish reserves against insurance risk
and provide excellent customer service.
This could include a process by which the state, the designated entity, the Green Mountain
Care Board and the legislature interact to assure that GMC payments and payment
methodologies are consistent with GMCB-established cost control trends, GMCB payment
reform policy and available state revenues. This process could include implementation of an allpayer rate setting system under which consistent and transparent payments would be made to
providers for Vermonters covered by Medicare and GMC. These payment methodologies would
continue the shift away from volume-based payments toward payments that increase provider
responsibility for managing total costs and quality of care and improving the health of
Vermonters.
We estimated that GMC would cost $4.3 billion in the first year of the program and $5.2 billion
in the fifth year. These cost estimates are based on current health care expenditures in
Vermont, trended forward to 2017 and inflated at a rate of four percent per year after that.
Importantly, these cost estimates do not include a specific one-time reduction in provider
payments to account for potential reduced administrative costs under GMC. We do not believe
that such a reduction can be accurately estimated, and instead proposed that the GMCB
annually consider efficiency gains in Vermonts health care system, including administrative
cost reductions, in setting actual annual growth rates for GMC. At a growth rate of four percent,
GMC would yield savings of $378 Million over the first five years of the program relative to
current predicted trends.
We estimated available state and federal funds for GMC. We determined the amount of state
Medicaid funds available to support GMC by taking current revenue sources, removing the
revenue associated with the employer assessment, the claims tax, and certain Medicaid
premiums, and then trended the revenue forward. Federal Medicaid funds were based on
projections of those who would be income-eligible through a Section 1115 Medicaid waiver
with an assumption that any lost state revenue would be replaced through the new GMC
revenue sources to ensure the required state match. Federal funds also would come from a
pass-through of funds currently paid to Vermont residents in the form of refundable tax
credits and cost-sharing reductions. This pass-though would have to be authorized through a
new Affordable Care Act Section 1332 waiver. The 2013 estimates of available federal ACA
funds were downgraded significantly as we entered into actual discussions with the federal
government about such a waiver. In addition, microsimulation modeling improved our ability to
estimate these funds with greater specificity.
We found that GMC could be paid for under these assumptions and program designs with two
new sources of funding to cover the remaining costs of GMC and replace employer-based
1

This concept is explained in more detail in chapter four.

4

premiums: a payroll tax on all Vermont employers and a public premium, which is an incomebased payment that would be made by all Vermonters on a sliding scale. We estimated the
payroll tax at 11.5 percent for the preferred policy choices we are including in this report.
Additionally, to fully fund GMC, the highest-income Vermonters would pay 9.5 percent of
income through a public premium, up to a maximum of $27,500, while lower-income
Vermonters would pay based on a sliding scale tied to a lower percentage of income ranging
from 0 up to 9.5 percent.
Estimates of the costs, available state and federal revenues and necessary new revenues for
GMC were derived from actuarial and microsimulation modeling. The modeling approximated
the impact of the assumed changes in the sources and uses of health care financing on the
distribution of health care costs across Vermont households, employers, state government and
the federal government.
Our estimated GMC revenues do not include any phase-in of the taxes described above.2 We
modeled phase-ins and exemptions that would cushion the blow of the GMC taxes for Vermont
employers, but found those modifications to the taxes to be unaffordable and would raise the
proposed tax rates significantly.
Legislative action would be necessary to implement the program described in this report.
Specifically, it would be necessary for the legislature to approve GMC revenue sources, changes
to the statutes governing the GMCB, changes to the processes required under Act 48, and
modifications to eligibility to include commuters to Vermont businesses.
Green Mountain Care Board approval and action also would be necessary to implement the
recommendations contained in this report. The Board is responsible for approval of the benefits
to be covered through GMC, is the lead agency responsible for implementing the cost-control
and payment reform elements of this plan, and is required to rule, prior to program
implementation, on specific statutory tests of whether GMC is likely to have a beneficial effect
on Vermont. The GMCB also has a central role in designing and administering the all-payer rate
setting system that is assumed as an underpinning of GMC.
We assumed a four percent rate of growth in health care costs over the first five years of Green
Mountain Care. We believe this is a reasonable assumption and an achievable rate of growth,
but it would require an explicit agreement through an all-payer waiver between the state, the
federal government and Vermonts health care providers to continue our efforts to change
provider payment and achieve efficiency in our system.
Lastly, the program described in this report, and the financing proposed for it, would only work
if Vermont has federal approval of necessary waivers and we are able to maintain current
federal financial support for health care spending in Vermont. We have embedded in this
proposal certain assumptions about federal approval and federal financial participation that we
2

See Appendix F for discussion of these items.

5

believe are reasonable, but actual federal concurrence with those assumptions has not yet
been received.
The chapters in this report explain how GMC would work, and what we predicted to be its
impact on Vermont. Chapter 1 provides background on why Vermont would want to pursue a
universal, publicly financed system of health care. Chapters 2 through 6 explain in more detail
how the program would work, what it would cost and how it would be financed. Chapter 7
explains the predicted impacts of GMC on the distribution of health care costs in Vermont.
Those interested in additional detail will find substantial additional information and analysis in
the appendices.
Given the promise of GMC for Vermonters, we must preserve for another day the vision of
universal publically financed health care paid for based on ability to pay. As a part of his budget
proposal and legislative agenda for the 2015 legislative session, Governor Shumlin will propose
changes designed to strengthen the Green Mountain Care Board, continue progress on
payment and delivery reform, increase access to primary care and other vital health care
services for all Vermonters, and better integrate information technology utilization and
oversight statewide.

Chapter One: Background

Green Mountain Care: Whats in it for Vermont?
The Vermont legislature passed Act 48 because it recognized a problem: Vermonts health care
system is broken. It is less broken than the system in many other U.S states, but it is broken
nonetheless. It provides good care to those who have the good fortune to access it, but today
our disjointed system:

Leaves people out: At last report about seven percent of Vermonters have no health
insurance at all.3 And, ironically, when they receive health care services, they likely
receive the largest bills, because they pay full charges without the negotiated discounts
commonly provided to insurers.4
Is unfair in how it distributes costs: Two Vermonters in the exact same family and job
situation, with exactly the same means to pay, can face very different costs, depending
on whether their employers offer coverage, how comprehensive that coverage is, and
whether they get public subsidies.
Sacrifices wage growth and cripples business: Of those Vermonters who do have
coverage, about 44 percent5 get it through their work. This places a huge financial and
administrative burden on their employers. Health care cost increases are a drag on wage
growth, and a major reason why wages have been stagnant in recent decades. 6
Is horribly complex: Anyone who has dealt with signing up for insurance, or
understanding a health care providers bill, knows how complicated and frustrating the
current system of insurance and billing is. It wastes Vermonters time, wastes providers
time, wastes money and is nonsensical.
Is terribly expensive and grows faster than our economy: Health care costs have
grown, on average, at 7.3 percent per year between 1991 and 20097 in Vermont. Our
state economy has grown at 4.2 percent.8 This means that health care has been growing
almost twice as fast as our economy.

http://www.dfr.vermont.gov/sites/default/files/VHHIS_2012_Final_Report.pdf
http://www.dfr.vermont.gov/sites/default/files/VHHIS_2012_Final_Report.pdf;
http://content.healthaffairs.org/content/26/3/780.short;
http://www.nejm.org/doi/full/10.1056/NEJMp1205225;
http://content.healthaffairs.org/content/32/6/1101.short
5
2014 Population Estimates by Julie Peper, Wakely Consulting Group.
6 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1932381; http://www.wsj.com/articles/markwarshawsky-and-andrew-biggs-income-inequality-and-rising-health-care-costs-1412568847
7
http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-andReports/NationalHealthExpendData/Downloads/res-tables.pdf
8http://www.bea.gov/iTable/iTable.cfm?reqid=70&step=1&isuri=1&acrdn=1#reqid=70&step=1&isuri=1&7003=20
0&7004=sic&7035=-1&7005=-1&7006=50000&7001=1200&7036=1&7002=1&7090=70&7007=1997,1996,1995,1994,1993&7093=levels
3
4

Encourages waste and inefficiency: With our current fee-for-service approach we pay
for health care by the unit. In general, there is no reward for keeping people healthy or
managing care well. An estimated 30 percent of health care services provided to
Americans are unnecessary.9 That is potentially worth more than $1.4 billion10 in
Vermont.

The legislature included in Act 48 several mechanisms for addressing these problems. In Act 48,
the legislature:

Established the Green Mountain Care Board (GMCB) to control health care cost growth,
change provider payment and oversee other major changes in Vermonts health care
system;
Created Vermont Health Connect to comply with the federal Affordable Care Act and
draw down federal funds to make health insurance more affordable for low and
moderate income Vermonters; and
Codified Green Mountain Care (GMC) as a program of universal, publicly funded
coverage for Vermonters.

The legislature specified certain parameters of GMC, including residency requirements for
coverage, minimum benefit levels and general administrative responsibility for the program.
The legislature delegated specific parameters of GMC to the executive branch and the GMCB to
develop, including the specific benefits to be covered, specifics of how the program would be
administered and the actual revenue sources to be used to fund the program.
We have worked since the passage of Act 48 to further define the design parameters, program
requirements, implementation steps and partnerships necessary to fully implement Green
Mountain Care, including the necessary funds for the program and our recommended funding
sources. In doing so, we have kept in mind six central goals:

Cover all Vermonters;

Provide coverage that is comprehensive;
Simplify the system for Vermonters, employers, and health care providers;
Provide for excellent customer service and capable administration;
Spread costs fairly;
Ensure that the program is financially sustainable for Vermont and does not hurt our
economy, employers, or employees.

http://news.medicine.duke.edu/wp-content/uploads/2013/08/Eliminating-Waste-in-US-Healthcare-Berwick.pdf
http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-andReports/NationalHealthExpendData/Downloads/res-tables.pdf
10

During this same time period, the GMCB has worked to establish appropriate health care cost
growth through the hospital budget and health insurance rate review processes. Hospital
budget growth was limited to 2.7 percent in 2014 and 3.1 percent in 2015 an average of 2.9
percent.11 In 2015, the GMCB reduced proposed rates for Vermonters insured under small
group and individual plans by a total of $6.9 million through the insurance rate review
process.12
Vermont also launched Vermont Health Connect, the states health benefits exchange, which
supports delivery of Qualified Health Plans, Advanced Premium Tax Credits, Vermont Premium
Assistance, Cost-sharing Reductions, and provides eligible Vermonters access to Medicaid. The
roll-out of all ACA exchanges has been challenging, but has resulted in expansion of coverage to
many Vermonters.13 The implementation of the legislatures decision to supplement federal
premium and cost-sharing subsidies to make insurance more affordable for Vermonters was
budgeted at $11.5 million for 2014.14
Vermont also has made great progress since 2011 to implement innovative health care
payment and delivery changes that would increase the sustainability and effectiveness of our
health care system for decades to come. The state received a $45 million State Innovation
Model (SIM) grant in 2013. That grant has supported three core activities aimed at improving
Vermonts health care system:

Enhancements to the states system of interoperable electronic medical records through

the Vermont Health Information Exchange, which is maintained by Vermont Information
Technology Leaders (VITL);
Implementation of all-payer shared savings programs, a first step away from fee-forservice payment, for the states Accountable Care Organizations (ACOs);
Development of a common system of care coordination and care management across
Vermonts Blueprint for Health primary care practices, our three ACOs, and other key
health, long-term services, and social services providers.

Despite this progress, it is difficult to fully address the problems to which Act 48 was responding
through any means other than an explicit public commitment to cover everyone, fund the
system fairly and create a transparent process for determining where our health care dollars
go. Decades of health reform have shown that to be true. Efforts to expand coverage, control
costs, simplify health insurance and improve the health of Vermonters have fallen short in a

11

Hospital budget data provided by the Green Mountain Care Board, 2014.
Proposed versus approved 2015 VHC Health Insurance Premiums in total dollars. Data provided by the GMCB,
2014.
13
The updated Vermont Household Insurance Survey Results are expected to be available in 2015 and will include
new statistics on the uninsured in Vermont.
14
We expect this budgeted amount to be reduced in FY15 Budget Adjustment. For more information, see BAA
documents when available.
12

system where coverage is arbitrarily linked to either employment or low-income status. This is
why the legislature endorsed moving to Green Mountain Care.
Green Mountain Care could address several central problems in the current health care system
that have not been addressed by other efforts in Vermont to date. Green Mountain Care could:

Guarantee that all Vermonters have coverage, regardless of their income or employer
and that the out-of-state employees who commute to work at Vermont businesses have
access to coverage;
Fund coverage with a combination of an 11.5 percent payroll tax, which does not
include a preferred phase in over 3 years for small businesses, and income-based family
contributions, rather than premiums;
Cover a broad array of benefits, consistent with what most employers now cover;
Limit Vermonters out-of-pocket costs for care to an average of six percent of total
costs, equivalent to what state employees and teachers currently enjoy;
Simplify enrollment so that Vermonters go through one door, regardless of income, to
obtain coverage;
Change provider payment so that doctors and other professionals are paid for the
outcomes of their work, and not simply the volume of services they provide, and
innovative networks of providers are rewarded for managing overall costs and quality of
care;
Replace the funds generated by the current provider tax, employer assessment and
claims tax to ensure a transparent financing system without these types of hidden taxes;
Be governed by an annual process that determines a reasonable growth in health care
costs to support a high-quality health care system.

The recommended design of Green Mountain Care and other options considered by the
administration are described in more detail in the chapters that follow.

10

Chapter Two: Who would be covered?

Green Mountain Care (GMC) would provide universal health care coverage to all Vermont
residents except those who are enrolled in Medicare or TRICARE, ensuring universal health care
coverage for all Vermonters. For Vermonters who are only able to rely on TRICARE when on
active duty or part of the year, GMC would be there for them at all other times. 15
We also would propose covering non-residents who commute into Vermont to work for
Vermont businesses. This ensures simplicity for businesses along Vermonts borders and
ensures that they are not faced with the necessity of having residents covered by GMC and
non-resident employees covered in some other manner.16 These commuters would contribute
to GMC through the public premium described in Chapter 6.
Employers could choose to continue offering health coverage to their employees. The
employee could choose either:

the employer-sponsored health insurance, and Green Mountain Care would act as
secondary coverage, or
Green Mountain Care.

Regardless, the employee would still financially contribute to Green Mountain Care through the
tax system, much in the way parents who choose to send their children to private school still
pay taxes supporting public education.
We estimate that 31,000 Vermonters would continue to have employer-sponsored coverage in
the first year of GMC, dropping to 2,000 in year five. In all, we estimate that 519,000 individuals
would be covered by GMC in the first year of the program, including 61,000 commuters
working for Vermont businesses. In year three, GMC would reach maturity with enrollment of
544,000 individuals, which is reduced to 538,000 in year five due to Vermonts aging
population.17
The table below shows the estimates of who would be covered by source of coverage in the
first year of GMC compared to the status quo.

15

More information on how the public premium works for those on TRICARE for only part of the year, see
Appendix F-4 Public Premium Exclusions and Credits.
16
This policy priority requires a change in Act 48, which currently only provides GMC coverage for residents.
17
All population numbers are based on the 94%AV Best Policies output from the microsimulation model.
11

Table 1: Source of Coverage 2017

Source of Primary
Coverage
Green Mountain Care

ACA

GMC
n/a

519,000

140,000

140,000

TRICARE and Veterans

10,000

10,000

Federal employees

10,000

(in GMC)

Employees with ESI

296,000

31,000

49,000

(in GMC)

Medicaid

141,000

(in GMC)

Uninsured

17,000

(in GMC)

Non-resident
commuters

61,000

(in GMC)

Medicare

Individual market

The primary requirement for GMC coverage is a showing of Vermont residency. Resident is
defined as:
an individual domiciled in Vermont as evidenced by an intent to maintain a
principal dwelling place in Vermont indefinitely and to return to Vermont if
temporarily absent, coupled with an act or acts consistent with that intent. An
individual shall not be considered to be a Vermont resident if he or she is 18
years of age or older and is claimed as a dependent on the tax return of a
resident of another state.18
At the time of passage of Act 48, residency definitions were debated by the legislature and
several options were considered and rejected. The legislature landed on this particular
definition because it is similar to federal health care programs, such as Medicaid. The
legislature considered a requirement that an individual reside in Vermont for a specified period
of time (durational residency requirement), for GMC coverage. However, this type of
requirement has been held to be unconstitutional for programs involving federal funding by the
United States Supreme Court.19

18

33 V.S.A. 1823(12)
See Shapiro v. Thompson, 394 U.S. 618, 22 L.Ed. 2d 606 (1969); and Appendix A-3 Vermont Legislative Council
Memorandum to House Health Care.
19

12

Impact of GMC on Certain Populations

This section describes several special populations, describes their current coverage, and
discusses how their coverage would be impacted by GMC. These groups include Medicare, state
employees, teachers, municipal employees, state and teacher retirees (resident and nonresident), non-resident employees of Vermont businesses, and employees who work for selfinsured companies. We have provided a summary chart in Appendix A of impacts on specific
populations for those interested in further detail.
Medicare Beneficiaries
Vermonters who have Medicare would remain on Medicare. The supplemental market would
also remain active. These Vermonters would not pay the public premium as part of funding
Green Mountain Care.
We examined a number of approaches for providing supplemental coverage for Vermonters
who have Medicare as their primary coverage. Three options for expanding coverage were
presented in the 2013 Green Mountain Care report authored by the University of
Massachusetts and Wakely Consulting Group.20 Any additional analysis of these options should
be postponed until GMC primary coverage is determined by the Green Mountain Care Board. It
would be important at that time to determine whether further integration of Medicare with
GMC is affordable and makes sense for Vermont Medicare beneficiaries and the state. For more
information, see Appendix B.
Medicaid-eligible Vermonters
Under Act 48, Vermonters who qualify for Medicaid coverage would continue to receive
coverage through Green Mountain Care, including Medicaid benefits.21 This means that
Vermonters in Green Mountain Care who are eligible for Medicaid would receive the enhanced
coverage available under Medicaid today, including transportation and no or low out-of-pocket
costs for care, in order to ensure that lack of income is not a barrier to health care.
In order to ensure that all Vermonters have a similar experience under Green Mountain Care,
Vermont would work towards an eligibility process for enhanced benefits funded by Medicaid
that is as seamless as possible and uses data that is already available to the state, where
available.

20

This report is available here:

http://hcr.vermont.gov/sites/hcr/files/2013/Health%20Care%20Reform%20Financing%20Plan_typos%26formattin
g%20corrected_012913.pdf . Medicare is discussed in detail in Appendices 6 and 7.
21

33 V.S.A. 1825(b)(1)(B)
13

State Employees
Currently, approximately 26,000 state employees and dependents are covered by the state
through a self-insured employer plan administered by Blue Cross Blue Shield of Vermont. Under
Act 48, state employees would be covered by GMC as their primary coverage, but supplemental
coverage may be provided if bargaining leads to that conclusion.22
Education Employees
Similarly, nearly 43,00023 teachers and school employees obtain coverage through the Vermont
Education Health Initiative (VEHI), would be covered by GMC. VEHI is currently a municipal trust
established under 24 V.S.A. 4942.24 The coverage for a given school district is bargained at the
local level between the school board and the Vermont National Education Association (NEA).
Under Act 48, education employees would be covered by GMC as their primary coverage, but
supplemental coverage may be provided as a result of bargaining between the school district
and the union.25
State and Education Retirees
Retired employees of the state or a school currently receive retiree health care from the state
of Vermont. This program is run by the Treasurers Office.
After implementation of Green Mountain Care, state and education retirees would continue to
have the same level of coverage as they do today regardless of residency. If they are Vermont
residents without Medicare, they would have coverage through Green Mountain Care.
For Vermonters with Medicare and non-resident retirees, the coverage would stay the same
and be maintained through a private insurer, just like today.
Municipal Employees
Town and city employees historically were covered through an association run by the Vermont
League of Cities and Towns. Currently, municipalities purchase a Vermont Health Connect plan
as a small employer, a large group insurance plan as a large employer or, in the case of one city,

22

33 V.S.A. 1830.
VEHI Annual Summary Report for the year ending June 30, 2014. Available here:
http://vehi.org/media/doc/VEHI_Annual_Report_Final.pdf
24
There are currently two school districts that receive coverage through small group insurance plans provided by
Vermont Health Connect. Under the Affordable Care Act, once a school districts insurance plan loses
grandfather status, the district must purchase insurance through either the small or large group insurance
market.
23

25

33 V.S.A. 1830.
14

have become self-insured. After implementation of Green Mountain Care, these employees
would have GMC primary coverage the same as any employee of a Vermont business.
Non-resident employees of Vermont business
We would propose allowing nonresident employees of Vermont businesses to also receive
coverage from GMC. Employers and members of the legislature had raised the issue of how
nonresidents who work for Vermont businesses would be covered. This is most often an issue
for employers who are located near the New Hampshire, New York, or Massachusetts borders,
although there are some Vermont companies that have business sites out of state or employ
nonresidents remotely. Currently, these businesses either purchase an insurance product with
an out-of-state-network that covers the states where their employees live or purchase a
different insurance product in each state where they have employees. In our modeling, we
assumed that out of state residents who work for Vermont employers could participate in
Green Mountain Care and would pay the public premium in order to minimize hassle and
complexity for border employers and employees.
Self-Insured Businesses
Any business could continue to provide health benefits to their employees as provided for
under the federal Employment Retirement Income Security Act of 1974 (ERISA). This includes
the ability to self-insure, which is commonly done today by large, multi-state or national
businesses. These types of companies are commonly described as ERISA companies, although
ERISA covers all businesses of any size or type. Under Green Mountain Care, businesses could
continue to choose to offer coverage. At the same time, employees would also have a choice
they could have GMC as their coverage and decline their employer-sponsored coverage or take
their employer-sponsored coverage as primary and GMC as secondary coverage.

15

Chapter Three: What benefits would be covered?

There are three primary components of a benefits package:
Covered services
o What services are paid for in whole or in part?
Cost-sharing
o How much does an individual pay out-of-pocket when they get services?
o Do individuals pay out-of-pocket through co-pays, deductibles, or co-insurance?
Network of health care providers
o Are there restrictions on the specific providers an individual can use?
Our recommendations regarding each of these components are described below.

Covered Services
Green Mountain Care would cover primary, preventive, and chronic care, as well as urgent care
and hospital services. These are the categories of services customarily covered by a good health
insurance policy in todays market. GMC would also cover dental and vision up to age 21 as
required by the ACA. GMC would not cover long-term care, adult dental services, adult vision
care, or hearing, though some of these services would be covered for Vermonters who would
otherwise be eligible for the Medicaid program. Federal and state law requires that Vermont
continue to cover an expanded range of benefits for people who are Medicaid-eligible.
Vermonters, including Vermont employers, would be able to purchase supplemental coverage
if desired.
We propose a package of covered services for Green Mountain Care that mirrors the coverage
most insured Vermonters have today. Under this proposal, GMC would cover:
Preventive care without any out-of-pocket cost;
Ambulatory patient services (outpatient care without being admitted to a hospital);
Emergency services;
Hospitalization;
Pregnancy, maternity, and newborn care (care before and after a baby is born);
Mental health and substance use disorder services, including behavioral health
treatment (this includes counseling and psychotherapy);
Prescription drugs;
Rehabilitative and habilitative services and devices (services and devices to help people
with injuries, disabilities, or chronic conditions gain or recover mental and physical
skills);
Laboratory services;
Preventive and wellness services and chronic disease management; and
Pediatric dental and vision services.

16

Medicaid benefits would remain the same for Vermonters who are Medicaid-eligible, meaning
that Medicaid-eligible Vermonters receive some benefits beyond the GMC core, such as
screening and diagnostic testing for children and some transportation services.
We suggest these services because they meet the federal standards under the Affordable Care
Act, and they are very similar, if not better than the covered services many Vermonters have
today.26 As required by Act 48, we considered including adult dental, adult vision, hearing, and
long term care services. After costing out these benefits and reviewing the literature, we do not
recommend covering these benefits during the first phase of Green Mountain Care.27 For more
information and background on these services, see Appendix B.

Cost-Sharing
Cost-sharing is typically measured through actuarial value (AV). Actuarial value is the average
amount as a percentage of total health care costs that a health plan would pay. The higher the
AV, the less an individual would pay out-of-pocket in co-pays, deductibles, and co-insurance
and the more paid for through public financing.
We recommend that GMC benefits be pegged to a 94 percent actuarial value, meaning the
average amount of the cost of covered services covered through public financing is 94 percent,
while the average amount of costs covered through consumer cost-sharing (out-of-pocket
expenses) would be six percent. This coverage is consistent with that provided by public sector
employers and many large private sector employers. Our reasoning for choosing this level of
actuarial value is:
It is consistent with the current norm in Vermont. As of 2013 more than 50 percent of
Vermonters who had purchased health insurance or had health care coverage through
their employer had a similar level of cost-sharing.28 In addition, 18 percent of
Vermonters had even lower costs through Medicaid.
It greatly reduces the extent to which Vermonters need to seek supplemental coverage
to maintain their current level of coverage when they are covered by GMC
It thereby reduces the potential complexity of the interface between primary and
secondary coverage after implementation of GMC
It eliminates the variation in coverage across the market, ensuring that all Vermonters
have access to affordable coverage regardless of health status.
The chart below shows a comparison of the current state employee plan and two plan designs
developed as options for Green Mountain Care at a 94% AV in 2017:

26

See Appendix B for a chart comparing covered services.

See Appendix B for PowerPoint presentations to the GMCB.
28
Wakely Consulting Group based on Vermont data.
27

17

Table 2: Plan Comparisons at 94% Actuarial Value

Plan Type

State Plan Original

2014

94% AV Option 1
2017

94% AV Option 2
2017

$0 - Med;
$25 - Rx

$0 - Med,
$75 - Rx (nongenerics)

$100 - Med;
$0 - Rx

unlimited - Med;
$775 - Rx (nonpreferred brand
excluded)

$5,000 - Med;
$1,300 - Rx

$650 - Med;
$200 - Rx

$250

$300

20%

Outpatient Surgery

$0

$150

20%

ER Visit

$50

$75

20%

Medical devices

$0

$0

20%

Lab/X-Rays

$0

$0

20%

Physician/mental health
office visit

$20

$25

$10

Specialist office visit

$20

$35

$20

Generic prescription drugs

10%

$10

$5

Brand prescription drugs

20%

20%

$15

Non-Brand prescription drugs

40%

40%

$30

Deductible

Out-of-pocket Maximum

Inpatient hospital visit

DEDUCTIBLE APPLIES TO YELLOW HIGHLIGHTED CELLS

Act 48 requires that we provide information to the Green Mountain Care Board about 80% AV
plans, 87% AV plans, and no cost-sharing (e.g. 100% AV). These plan designs and their costs are
in Appendix B.

Provider Networks
We have not assumed restrictions on provider networks in any of our plan designs, and GMC
would be available to Vermonters who are out of state through a national network. We do
expect that, to live within cost constraints and improve care for Vermonters, it may be
necessary to require Vermonters to identify a primary care provider who coordinates their care.
Also, as is true of both private and public insurers today, GMC might require specific licensing
and/or credentialing in order to contract with a specific provider.

18

Supplemental Insurance Market

Supplemental health insurance policies are typically designed to add on more comprehensive
health coverage. They wrap around and complement basic health insurance. 29 Supplemental
plans can either cover services that are not offered by the plan or supplement cost-sharing
under the plan. Supplemental insurance covering additional services includes adult dental and
vision. We do not anticipate this market changing. Supplemental insurance covering alternative
cost-sharing includes Medigap plans for persons with Medicare. We do not anticipate this
market changing, either.
While supplemental policies can fill in gaps in coverage, they can also lead some consumers to
pay for more protection than is necessary. Some consumers are over-insured and are paying
for coverage they are unlikely to use. Supplemental insurance offerings should be tailored to
complement comprehensive health coverage and to offer coverage for services that are beyond
the scope of the comprehensive plan, but are not duplicative or unnecessary. Because the
recommended GMC benefit package is relatively generous, it is unlikely that individuals would
need or desire further coverage, other than dental or vision coverage.

29

Insurance Basics. Supplemental Policies. www.healthcare.gov.

19

Chapter Four:30 How would the program operate?

This chapter describes our proposal for how GMC would operate, including the role of state
government, the role of private contractors or entities, the process for determining provider
payment, and the process for determining the overall GMC budget.
GMC should be operated as a public-private partnership between the state of Vermont and a
strong private sector partner under either a designated public utility or a designated
facilitator model. Both are described in more detail below. The state has a responsibility and
state statutory obligation to provide appropriate oversight and governance for the program,
and the state is required by federal law to perform certain functions with respect to
administering federal funds and fulfilling the requirements of the Medicaid program. However,
we believe the right private sector partner would bring strengths to GMC, including:

Appropriate financial reserves to guard against the insurance risk inherent in the
program;
Proven expertise in administering health care coverage for a broad array of Vermonters;
A track record of negotiating fair and reasonable health care provider payment; and
Access to a national and international contracted provider network.

The designated entity would assume primary responsibility for provider contracting and
provider payment, within parameters defined by the Green Mountain Care Board (GMCB).
Specifically, as described more fully in chapter 5, we suggest a process whereby the GMCB
outlines general rules for provider payment consistent with the statutory authority granted
them in Act 48 and the legislative directive to shift away from volume-based provider payment
mechanisms. The GMCB also would outline:

The expected rate of increase in GMC expenditures for the coming year, taking into
account cost pressures and revenue constraints;
Allowed administrative costs for the designated entity;
Performance measurement requirements for the designated entity.

The designated entity would be responsible for contract negotiations with health care
providers, adhering to the GMCB requirements for both the overall rate of growth in
expenditures and the general methodology for provider payment. The resulting total cost
would come before the GMCB in the form of a rate case, similar to a rate filing received by

30

Act 144 of 2014, Sec. 7, the Secretary of Human Services is required to report to the General Assembly on or
before January 15, 2015 the elements of Green Mountain Care, such as claims administration and provider
relations, for which the Agency plans to solicit bids for administration pursuant to 33 V.S.A. 1827(a), as well as
the dates by which the Agency will solicit bids for administration of those elements and by which it will award the
contracts. This chapter is meant to fulfil the requirement to describe the operational design of GMC. The
administration does not intend to solicit bids at this time.
20

the GMCB today. The GMCB would approve, disapprove or modify the rate filing and would
monitor the program for adherence to cost and other performance requirements.
Lastly, under Act 48, the GMCB is responsible for setting a three year budget for Green
Mountain Care. We would propose some adjustments to todays consensus revenue process,
specifically that the consensus process include the Green Mountain Care taxes and the addition
of a consensus health care expenditure projection. Using these tools, the GMCB would develop
a three-year rolling budget and would propose either cost reductions or an inflation factor to
provide the legislature with a balanced budget. This process is described in greater detail later
in this chapter.
We would recommend that further analysis be done to determine whether the state
designated entity should be considered for executing the following functions, subject to
discussion with that entity and a full assessment of state and federal requirements related to
Medicaid administration in the context of both operational efficiency and service quality:

Enrollment
Claims adjudication
Provider reimbursement
Coordination of benefits and subrogation
Primary care provider selection and referral management
Medical necessity determination
Adjudicating out-of-state coverage for non-emergent care
Setting payment terms for covered services, within parameters established by the Green
Mountain Care Board
Negotiating provider payments, including developing population-based payments to
ACOs
Data analysis, reporting and settlement with at-risk providers
Hospital, physician and other provider credentialing & network enrollment, including
contracting a national network and covering services out-of-country
Ongoing budgeting for medical and administrative costs related to the services paid for
under GMC
Financial management, including:
o reserving
o reinsurance
o cash flow management
o retroactive provider settlements
o actuarial analyses, projections and reporting
o budgeting for GMC administrative costs
Program integrity, including some fraud and abuse detection
Customer service

21

We would suggest that the state retain at least the following functions related to GMC:

Eligibility determination, including determination of eligibility for federal Medicaid

matching funds for Vermonters covered by GMC
Interface with federal agencies responsible for GMC oversight and funding
Oversight of provider payment policy
Oversight of the total GMC budget and alignment of the budget with available state and
federal funding (as described in further detail below)
Oversight of the financial health and adequacy of reserves of the designated entity
Overall evaluation of the performance of GMC and the designated entity in terms of
costs, quality of care and consumer experience
Appeals and grievances

Certain functions currently performed by the state (through the Department of Vermont Health
Access) and by insurance carriers warrant further analysis, as they might reasonably transfer to
ACOs as providers assume more responsibility and capability for managing medical risk in the
future. These include:

Care management and care coordination

High-cost case management
Chronic illness management
Pre-authorization for referrals and drugs
Pre-certification for certain types of care
Utilization management

In addition, as ACOs evolve, there would be a need for continued examination of the
appropriate state role in overseeing the degree to which those entities assume insurance risk,
and the degree to which insurers could reduce their need for financial reserves as risk is
transferred to ACOs. Responsibility for this determination would fall to the GMCB and the
Department of Financial Regulation.

Designated Entity Models

The designated public utility and designated facilitator models are discussed in more detail
below.
Public utility model
Under current law, public utilities are private companies formed under general corporate law.
They must seek and obtain a certificate of public good from the Public Service Board before
operating as a utility and once in operation are heavily regulated by the Public Service Board
under Title 30. The Public Service Board has jurisdiction over virtually every facet of the
22

operation of a public utilitys business, including the rates charged, quality of service, and
overall financial management.31
Utilizing a public utility model to make a given entity the vendor for GMC would likely consist of
these fundamental characteristics: (1) operation under a certificate of public good; (2)
operation under the jurisdiction of GMCB; and (3) strict regulation by GMCB of all (or nearly all)
aspects of the entitys business. This could be achieved through changes to the statutes
governing GMCB as well as those governing the entity.32
Designated facilitator model
Within the public service statutes, the Public Service Board has jurisdiction over the sale to
electric companies of electricity generated from renewable resources and cogeneration.33 The
Public Service Board issued a rule designed to encourage such development of electricity. 34
Included in the rule is a provision stating that the Board may by order designate one or more
Purchasing Agents. Such an order may define appropriate terms and conditions, including the
rights, authority, duties and obligations of the Purchasing Agent, and the authority of the Board
to regulate and supervise the Purchasing Agent.35 Generally, a purchasing agent serves as an
intermediary between power producers and purchasing utilities.36 The rule goes on to provide
permissive criteria the Public Service Board may use in designating a purchasing agent.37 Finally,
the rule contemplates that the designated purchasing agent would be given the opportunity to
accept the designation.38
To follow this model, statutes governing GMCB or the executive branch could be amended to
include the authority to designate a vendor. Because of the breadth of services it would
provide, the GMC vendor would be more of a facilitator than simply a purchasing agent.
Once a state agency or the GMCB issues an order designating the facilitator, the law could
either allow the entity the option of accepting the designation or could require the entity to
accept the designation. If voluntary and it accepts, the state and the entity would negotiate a
contract for specific services to be provided. The role of the facilitator could be described in the
statute, the order designating the facilitator, or in the contract between the parties.

31

30 V.S.A. 209, 218, 249.

For example, Blue Cross Blue Shield of Vermont is a nonprofit hospital service corporation. These types of
companies have specific enabling legislation in 8 V.S.A. Chapters 123 and 125. BCBSVT is the only nonprofit
hospital service corporation operating in Vermont.
33
30 V.S.A. 209(a)(8).
34
Public Service Board Rule 4.100: Small Power Production and Cogeneration.
35
Rule 4.102(C).
36
Petition of Vermont Electric Power Producers, Inc., 165 Vt. 282, 285 (1996).
37
Rule 4.102(C).
38
Id.
32

23

Medicaid Operational Integration

We anticipate that operational integration of Medicaid and Green Mountain Care would
happen in phases, staged according to the readiness of the states new integrated eligibility and
MMIS systems.

Provider Contracting and Provider Payment

We are assuming that Green Mountain Care would operate in the context of an all-payer
system, whereby health care provider payment rates in Vermont would be standardized across
all payers, including Medicare, to achieve fairness, consistency and transparency in provider
pricing while encouraging a deliberate shift from volume-based to outcomes-based provider
payment. This plan is described in more detail in Chapter 5.
We suggest that the designated entity assume primary responsibility for provider contracting
and provider payment under GMC, within parameters defined by the Green Mountain Care
Board (GMCB). The GMCB would outline general rules for provider payment consistent with the
statutory authority granted them in Act 48 and the legislative direction to shift away from
volume-based provider payment mechanisms. The GMCB also would outline:

The expected rate of increase in GMC expenditures for the coming year, taking into
account cost pressures and revenue constraints;
Allowed administrative costs for the designated entity;
Performance measurement requirements for the designated entity.

The designated entity then would commence contract negotiations with health care providers,
attempting to adhere to the GMCB requirements for both the overall rate of growth in
expenditures and the general methodology for provider payment. The designated entity would
bring the resulting total cost proposal for GMC to the GMCB in the form of a rate case, similar
to a rate filing received by the GMCB today. The GMCB would approve, disapprove or modify
the rate filing and would monitor the program for adherence to cost and other performance
requirements. This process is illustrated below. Later in this chapter we describe how this
process would interface with legislative and executive branch revenue forecasting and
budgeting processes.

24

Figure 1: Green Mountain Care Provider Rate Oversight and Negotiation

GMCB sets rules for
provider payment,
allowed rates of cost
increase, allowed
administrative costs, and
quality measurement
requirements

GMCB monitors program

and designated entity
performance/compliance
with their rules

Designated entity
negotiates provider
payment rates for both
ACOs and non-ACO
providers consistent with
GMCB rules

GMCB approves,
disapproves or modifies
rate filing

Designated entity
submits a rate filing that
reflects negotiated rates
to GMCB for review

Budgeting and Budget/Revenue Reconciliation

Green Mountain Care offers the promise of guaranteed coverage to all Vermonters, consistent
cost control, transparency and fairness in the distribution of health care costs and a more
explicit reflection of public policy goals such as health promotion and prevention in our health
care spending. However, it also would create a very explicit tension between growth in public
revenue sources and growth in health care costs, which have not been aligned historically in
Vermont or the United States.
To address this tension, and provide for appropriate balance of interests in setting the GMC
budget, we proposed:

Three risk mitigation strategies to ensure that the state is prepared if expenditures are
higher than expected or revenues are lower than expected; and
A consensus process for projecting revenues and expenditures.

25

Each of these is explained below.

Risk Mitigation
We would recommend that GMC utilize three risk management strategies39:

Insurance reserves to cover insurance claims risk;

Revenue reserves for the Green Mountain Care Fund; and
A budget and revenue cycle that includes an adjustable tax rate to provide sufficient
revenue to correct any systemic financial imbalances.

These strategies are described below.

Insurance and revenue reserves
We determined that the State would need to have access to reserves to account for claims risk
and unexpected slowdowns in the economy. We asked our actuarial firm to calculate the
needed reserves as though GMC was an insured product. They estimated that Green Mountain
Care requires between $70 and $117 million in reserve capital depending on the level of
capitation achieved through the all payer waiver.40 We looked at providing these reserve funds
in two ways, insurance reserves and revenue reserves.
We would recommend leveraging a relationship with the GMC administrator in a way that
would allow Vermont to use or acquire insurance reserves without raising additional revenue
for year one. Failure to leverage or acquire reserves would increase the GMC public financing
amount by a commensurate amount.
Revenue reserves protect the State against an unexpected slowdown in state tax collection. All
major state revenue funds carry reserves, and we would recommend that Green Mountain Care
Fund also carry revenue reserves.
Major state revenue funds are required to carry a five percent reserve under state law. We
calculated the minimum amount in reserves by looking at five percent on the amount of state
taxes in the Green Mountain Care Fund. Stated another way, it would be a reserve of the entire
fund value excluding federal contributions. This would have the additional effect of providing
reserves for Medicaid, which do not exist under the current system. This calculation resulted in
a reserve of approximately $146.2 million.

39

We considered reinsurance as a fourth risk mitigation strategy. We rejected this approach based on the advice of
our actuaries. See Appendix D.
40
For more detail, see Appendix D.
26

We would recommend a one-time bond issue to ensure that reserves beyond the minimum are
fully available at program launch. The bond issue would raise $200 million, setting reserves
above the statutory minimum. Repayment of the bond would cost $44 million annually for the
first five years of operation. Failure to acquire these reserves through bonding would increase
the GMC public financing required.41
Budget and revenue Cycle
It would be necessary to reconcile GMC outlays with the states revenue and budget cycles. We
would recommend managing the GMC budget and revenue cycle as follows.
Recommendation 1: Inclusion of GMC Taxes in State Revenue Forecast
GMC represents a significant enlargement of the State balance sheet. The GMC Special Fund
should be added to the States consensus revenue process and adopted by the Emergency
Board. In this way, we can best understand the funds revenue outlook in the same manner as
other state funds.
Recommendation 2: Create a Consensus Health Care Expenditure Forecast
Similarly, a forecast should be developed to anticipate the relationship between GMC revenues
and expenditures over a five-year period. We would need to determine the proper relationship
between the administration, legislature, Green Mountain Care Board, and the designated entity
for the production of this forecast and whether it ought to be approved by the Emergency
Board or some other body.
These two forecasts would help execute the budgeting requirements set forth in Act 48, which
require the Green Mountain Care Board, in collaboration with others, to develop a Green
Mountain Care budget including recommended appropriations, revenue estimates, and
necessary modifications to tax rates and other assessments.
Recommendation 3: Amend Act 48 of 2011 Budget Requirements
Act 48 requires a budget for Green Mountain Care every three years. We would recommend
modifying this requirement by having an annual budget and three-year cost projection. This
rolling three-year budget would seek to align GMC budgeting with the current state budget and
appropriation process while providing appropriate planning for the future.

41

Reliance on bond funding for reserves involves a number of considerations, including whether such a bond for
reserves would impact Vermonts current bond rating.
27

Recommendation 4: Create a Legislatively Directed Process to Adjust Tax Rates over Time
Health care spending tends to grow faster than the economy. This could cause a gap between
GMC health care expenditures and revenues, which track more closely with inflation over time.
We would recommend that the legislature create a methodology in statute that ensures that
health care expenditures and GMC revenues align as closely as possible.
We would recommend the following multi-step process.

Step 1: The Green Mountain Care Board would determine the cost of GMC given the
benefits package, health care expenditure forecasts, input from the designated entity
regarding provider contracts and rates, and the state budget.
Step 2: The Board would use the consensus revenue forecast to determine revenues
available for the next year.
Step 3: The Board would certify whether revenues and expenses aligned. If aligned, no
further action would be needed.
Step 4: If there was a revenue shortfall, the Board would certify the fiscal gap.
Step 5: The Commissioner of Taxes would be required to appear before the Board and
present adjusted tax rates that split the fiscal gap equally between the payroll tax and
individual tax.

The legislature would maintain its authority and control by setting forth the methodology and
creating guard rails that set a lower and upper boundary for potential tax adjustments. These
guardrails would limit the maximum possible growth in tax rates.
The guardrails would set the annual tax rate adjustment at no less than 0% and no more than
5%. The inability to reduce the rate from the previous year without further direct legislative
action insulates Vermonters from rate shock if expenditures vary significantly from year to year.
The maximum rate ensures that taxpayers are protected in case of escalating costs. The Board
and designated entity would need to find cost savings if the fiscal gap exceeds the maximum tax
adjustment.
Recommendation 5: Create a Methodology for Reserves
We would recommend that Commissioner of the Department of Financial Regulation partner
with the designated entity to create a methodology for monitoring reserves, using reserves,
and rebating reserves to taxpayers if they are in excess of what is necessary. This methodology
would need to be approved by the legislature.
This overall approach to managing risk is designed to ensure that GMC has sufficient revenue to
pay for the health care of all Vermont residents and maintain access to appropriate health care
facilities and providers.

28

Chapter Five: Who would provide health care services and how would
they get paid?
The primary functions of Green Mountain Care would be to provide guaranteed coverage to
Vermonters for the health care services they need and to pay health care professionals for
those services. GMC must pay providers fairly and in a timely manner for the services
Vermonters need. This is essential to maintain access to services, improve quality of services,
and ensure our ability, as a state, to recruit and retain the providers we need over the long
term. How we structure these payments, and the incentives we embed in payments, also would
have an impact on total cost of the program, quality of services and, ultimately, the health of
Vermonters.
There would be three central elements to determining provider payment under GMC:

What process would we use to determine provider payment?

What methodology would we use?
What amount would we pay?

Our recommendations on each of these elements are described below.

We assume Green Mountain Care would pay providers both in and out of state. Today, most
Vermonters have insurance coverage that provides an out of state network and about a third of
all Vermont residents seek care at Dartmouth-Hitchcock Medical Center in New Hampshire.
Consistent with the operational design described in Chapter 4, we would expect that the
designated entity would contract with out-of-state providers as necessary to meet the needs of
Vermonters.

Process to Determine Provider Payment

We would recommend that provider payment be determined though an all-payer rate setting
process overseen by the Green Mountain Care Board (GMCB). The GMCB has expressed its
intent to begin designing an all-payer system under their existing regulatory authority, and the
state has begun discussions with the federal government regarding federal permissions
necessary to include Medicare in a Vermont all-payer system. Design and implementation of
such a system would take an estimated one to two years.
We believe the all-payer payment system is an essential underpinning of GMC in that it would
standardize and make more rational and transparent the details of and variations in provider
payment. The all-payer system also would require an all-payer waiver from the federal Center
for Medicare and Medicaid Services (CMS), which would operationalize an agreement between
the state, the federal government and providers about reasonable rates of growth in health
care costs and expected changes in provider payment methods.

29

We anticipate that an all-payer system would determine both:

General rules for payments to Accountable Care Organizations (ACOs). The vast majority
of Vermonts health care providers, and many long-term services and supports
providers, currently are involved in the shared savings programs as participants in ACOs.
General rules for fee-for-service payments to providers who are excluded from or
choose not to participate in ACOs, and for services to visitors.

Each type of payment would be standardized according to GMCB parameters, and each would
be subject to an overall growth cap, across all payers. The growth cap would function as both
ceiling and floor i.e., Medicaid and Medicare would grow at the same rate as other payers.
For ACOs, the GMCB would set rules, as they have for the Medicaid and commercial shared
savings programs, for such details as risk-sharing between ACO and GMC, risk adjustment and
overall calculation of ACO payments. The GMCB and/or DFR might set additional requirement
for ACOs with regard to risk assumption and reserves.
For non-ACO providers, the GMCB would require a transparent, standardized and fair fee
schedule that is consistent with policy goals such as adequate support for primary care,
prevention and population health management.
We believe that it is appropriate to use a process involving a third party vendor and the Green
Mountain Care Board to determine provider payment levels and provider payment
methodology for Green Mountain Care. This process can assure that GMC payments and
payment methodologies are consistent with GMCB cost control trends, consistent with GMCB
payment reform policy, and appropriately reflective of provider market dynamics.

Payment Methodology
The methodology to be used for provider payment ultimately would be determined by the
Green Mountain Care Board. However, we believe it is essential to continue to build on the
work of the Green Mountain Care Board, the Vermont Health Care Innovation Project and
Vermonts three Accountable Care Organizations and continue to move away from fee-forservice provider payment, toward payment models under which providers assume greater
responsibility for managing total costs and quality of care for Vermonters, and are rewarded for
such outcomes. Continuing this shift would be essential to the long-term viability of GMC and
its success at improving Vermonters health.

30

Reimbursement Amounts
The precise amount to be paid for GMC services would be a function of both the general rules
established through the all-payer rate setting process and the contract negotiations of the
designated entity. We have assumed in our analyses of GMC costs that current provider
payment amounts and utilization would be trended forward, in aggregate and on average, at a
rate of 3.3 and 6.6 percent for Medicaid and Commercial populations between 2012 and
2017.42 All populations covered by GMC are assumed to trend at a rate of four percent beyond
2017.
While there might be some changes in specific reimbursement methods or levels for providers,
and some standardization across provider categories, overall payments would be inflated at a
reasonable amount, consistent with GMCB policy. The trend from 2012 to 2017 was developed
in consensus with the RAND Corporation, which was hired by the legislatures Joint Fiscal Office.
The trend from 2017 and beyond of four percent was developed based on assumptions about
the success of payment and delivery system reform, as well as experience of Maryland, the only
state that currently has an all-payer waiver to support its all-payer rate setting system. More
information about the trend is available in Appendix D.

42

Our actuaries applied the trends at the sub-population level to reflect current differences in morbidity and
utilization in these populations.
31

Chapter Six: What would GMC cost and how would we pay for it?
This chapter describes our estimates of the costs of Green Mountain Care and our
recommendations for financing mechanisms to cover those costs.

Introduction: Vermont Health Care Spending in Context

Vermont residents spend billions of dollars on health care today, and this spending is expected
to grow annually at a rate that exceeds the rate of growth in our economy. Vermont residents
spent $5.123 billion on health care in 2012.43
This aggregate health care spending number incorporates billions in spending by Vermont
residents on insurance premiums, out-of-pocket expenses, and taxes paid that were spent by
federal, state, and local governments on health care. For example, in 2012, Vermonters spent
$1.886 billion in private insurance premiums and paid $715 million out-of-pocket for health
care.44 These big numbers convey two points. First, Vermonters already make a substantial and
growing financial commitment to health care, regardless of the implementation of Green
Mountain Care. Second, Green Mountain Cares financing system would incorporate and
replace a vast pool of existing health care spending as Green Mountain Care would replace
most private insurance premiums and some out-of-pocket spending for Vermonters.

Green Mountain Care Costs

We estimate that the total cost of Green Mountain Care would be $4.34 billion in 2017, with
another $187 million paid out-of-pocket. All costs except for out-of-pocket costs would be paid
from the Green Mountain Care Fund, created by Act 48 of 2011. These costs are detailed in
Table 3 below.
The coverage cost represents the aggregate per member per year premium equivalent for all
enrollees and an administrative cost that would be retained by the designated entity that
functions as the claims payer.45 State operations costs represent an estimate for those
administrative costs not borne by the payer. These expenses include repayment of bonds
issued for revenue reserves and health care innovation funding, including the cost of operating
the Green Mountain Care Board, continuation of Health Information Technology Fund, and the
estimated non Medicaid cost of Vermont Health Connect. Also, we include an unallocated
contingency for unexpected operational expenses. We consider these assumptions
conservative, as Green Mountain Care and the development of the designated entity would
result in efficiencies for state government that save taxpayers money; however, we are not
prepared at this time to estimate and book these savings until GMC operations are further
developed in final detail.
43

2012 GMCB Expenditure Analysis, see

http://gmcboard.vermont.gov/sites/gmcboard/files/GMCB_2012_Expenditure_Analysis_Res_Prov_2014_2_20.pdf
44
2012 GMCB Expenditure Analysis
45
A detailed breakdown of PMPM costs and administrative costs can be found in Appendix D
32

Table 3: 2017 Annualized Green Mountain Care Cost

GMC Plan Costs Excludes Out-of-pocket Costs

Value in Millions

Coverage46
GMC Primary (Non Medicaid Eligible)

2,171

GMC Medicaid Primary

1,126

State Medicaid Fixed Costs

680

Medicaid Dual Eligible

259

Employer Sponsored Insurance Wrap

28
4,26347

Total Cost of Coverage

State Operations Cost
Bonding for Revenue Reserves

44

Health Care Innovation Spending

23

Contingency

10

Total GMC Cost

4,340

Given these expenses, Table 4 sets forth the total GMC costs from 2017 2021.
Table 4: Green Mountain Care Costs, 2017 2021
GMC Plan Costs
(Value in Millions)
Excludes Out-of-pocket Costs
Coverage
Total State Operations Cost
Total GMC Cost
Annual Growth Rate

2017

2018

2019

2020

2021

4,263

4,501

4,741

4,921

5,096

77

78

79

80

81

4,340

4,579

4,820

5,001

5,177

5.58%

5.33%

3.80%

3.56%

Green Mountain Care health care coverage costs are trended forward at 4% annually; however,
total costs do not grow at a flat four percent rate. Growth exceeds four percent annually the
first two years as people move from employer-sponsored insurance to GMC. Costs grow by less
than 4% annually in 2020 and 2021 as the GMC population shrinks due to more Vermonters
growing older and moving to Medicare. State operational costs are trended forward at 3%.

46
47

Includes administrative costs paid to designated entity.

Total Cost of Coverage is $1 million less than sum of all cost categories due to rounding.
33

Green Mountain Care Revenues

The state would use the Green Mountain Care Fund established in Act 48 of 2011 for the
purposes of managing revenues and spending related to GMC. The Green Mountain Care Fund
would capture three revenue sources:
Federal funds
Existing state revenues
Green Mountain Care taxes, which would replace private insurance premiums
The amount of Green Mountain Care taxes needed is determined by subtracting federal funding
and existing state revenues from the total cost, leaving a net amount to be funded by new state
tax revenue sources. We estimate that amount to be $2.580 billion. We would suggest two new
state tax revenue sources to cover these costs:
A payroll tax levied on employers only, based on the amount of their payroll; and
A public premium paid by individual Vermonters based on their income and family
size.48
Federal funds include those funds provided through the Affordable Care Act Section 1332
waiver, such as advanced premium tax credit subsidies, cost-sharing subsidies, and employer
tax credits that are passed to Vermont by the federal government49 and federal funds used for
current health programs, such as Medicaid. Existing state revenues include some current state
Medicaid revenue. The payroll tax and public premium are new revenue sources that replace
existing health care spending.

48

The public premium would function as an income tax and would be deductible as such on federal taxes as
described in Chapter 7.
49
For details on the funds available through the ACA waiver, see Appendix E-2.
34

Table 5 summarizes these funding sources:

Table 5: 2017 Annualized Green Mountain Care Revenues
GMC FUND REVENUES
Excludes Out-of-Pocket Costs
Federal Funds

Value in Millions

Federal: Medicaid Match

1,310

Federal: ACA Waiver Funds

106

TOTAL Federal Funds

1,416

Existing State Funds

State Medicaid Revenue

344

New GMC Taxes

GMC Payroll Tax

1,510

GMC Public Premium

1,247

TOTAL State Funds

3,101

TOTAL GMC REVENUES

4,517

Below we address our assumptions about each of these revenue sources in more detail.
Federal Funds
Vermonts health care system relies on substantial federal funding today. Green Mountain Care
would draw down a greater level of federal support, because more Vermonters would be
covered and federal funding would be maximized. Vermont would receive funding under the
waiver provisions of the Affordable Care Act and under existing Section 1115 Medicaid waivers.
Under the Affordable Care Act Section 1332 waiver (ACA waiver), the state may receive funding
that would have been paid to Vermont residents and businesses in the form of advanced
premium tax credits, cost-sharing reductions, and small business tax credit payments had the
ACAs requirement to have an Exchange selling health insurance not been waived. 50
Currently, the federal government provides advanced payment of the premium tax credit and
cost-sharing reduction payments directly to insurers on behalf of eligible individuals. Under the
ACA waiver, Vermont would waive this requirement because residents would move from
paying premiums for insurance plans through Vermont Health Connect to having publiclyfinanced health care coverage under Green Mountain Care.51 Under the ACA waiver, the federal
50
51

ACA 1332(a)(3); 42 U.S.C. 18052(a)(3).

ACA 1332(a)(2); 42 U.S.C. 18052(a)(2).
35

government would pay Vermont the aggregate amount of the premium tax credits and costsharing reduction payments that would have otherwise been paid under the ACA.52
We estimate that Vermont would receive $106 million in federal pass through funding related
to advanced premium tax credits and cost-sharing reductions. The estimate assumes that
federal funds for all non-Medicaid eligible Vermont residents who would have received
premium tax credits and cost-sharing subsidies would be provided to the state. The estimate is
based on current discussions with multiple federal agencies regarding the waiver; however, our
federal partners have not yet approved Vermonts methodology for calculating pass through
funding. This amount represents a substantial reduction from previous estimates. Specifically,
the 2013 report estimated federal contributions via the ACA waiver at $267 million.53
In addition to the premium tax credit and cost-sharing reduction payments, the ACA waiver also
allows for states to collect the small business health care tax credit that would have otherwise
gone to small employers participating in Vermont Health Connect.54 Vermont employers with
25 or fewer FTEs and average wages of less than $50,000 per employee per year would be
eligible for up to 50 percent of their contribution to employees insurance premiums (35
percent for tax-exempt businesses) if they purchase coverage through Vermont Health
Connect. We did not include the small business health care tax credit in our estimates,
however, because the credit is limited to two consecutive years starting in 2014,55 and we
estimate that employers who take the credit will do so in the years before implementation of
GMC, resulting in little to no revenue after 2017.
Table 6: Projected ACA Waiver Funds, 2017 2021
Year (Values in Millions)
Tax Credits (APTC & CSR)

2017
106

2018
118

2019
122

2020
125

2021
132

Additionally, the federal government would continue to match state Medicaid spending. To
determine the federal Medicaid match in Green Mountain Care, we projected the populations
in GMC that would be eligible for a federal match. Certain populations receive higher dollar
matches from the federal government, so these populations were separately identified.
Detailed descriptions of the populations and applicable Federal Medical Assistance Percentages
(FMAP) rates are included in Appendix C and Appendix F.
52

ACA 1332(a)(3); 42 U.S.C. 18052(a)(3). The ACA does not define how the premium tax credits and cost
sharing reductions payments would be calculated. After analyzing various options, Vermont proposed that the
federal government calculate the aggregate amount of the premium tax credits and cost sharing reduction
payments by using a modified formula that the federal government is already using with the Basic Health Plan
(BHP). See Appendix E-2 for more information on the methodology of these calculations.
53

http://hcr.vermont.gov/sites/hcr/files/2013/Health%20Care%20Reform%20Financing%20Plan_typos%26formattin
g%20corrected_012913.pdf
54
ACA 1332(a)(3); 42 U.S.C. 18052(a)(3).
55
ACA 1421(a); I.R.C. 45R(e)(2).
36

The total federal contribution is calculated as the product of the federal match rate and the
projected cost of the populations. Overall, we estimate that the state would draw down $1.31
billion in federal Medicaid dollars in 2017, a $285 million increase. We estimate that this federal
funding source would grow to $1.505 billion by 2021. The increase in revenue is attributed to
expanded Medicaid enrollment. Specifically, we assume that nearly all Vermont residents who
are Medicaid eligible actually enroll instead of being uninsured or taking non-Medicaid
insurance. The estimate is based on our actuarial and economic analysis and current discussions
with multiple federal agencies and the states current Section 1115 Medicaid waiver. As noted
above, this estimate assumes current federal rules and provisions of Vermonts current Section
1115 Medicaid waivers would continue to apply.
Existing State Revenues
Most existing state revenue that supports Medicaid would be used to pay for Green Mountain
Care. In our analysis we found that state Medicaid funding estimates face three types of
downward pressure.
First, some current state Medicaid revenue sources would either go away entirely or be
substantially reduced after implementation of Green Mountain Care. Specifically, the revenue
sources are:

the claims tax, which is generated by taxing private health insurance claims; and
the employer assessment, which taxes employers who do not provide health care
coverage, whose employees are uninsured, or whose employees have Medicaid or
purchase as individuals through Vermont Health Connect.

These revenue sources are substantially reduced as Vermonters move from private insurance to
GMC, resulting in fewer insurance claims to tax. We assumed that the claims tax and the
employer assessment would be repealed.
Second, previous estimates of State Medicaid revenue assumed that the State would make
progress toward reducing the cost shift prior to implementation of Green Mountain Care. This
did not happen due to persistent State budget pressures related to less robust than forecast
economic growth.
Third, we assume repeal of provider taxes, which provide substantial support to the States
Medicaid program today. Provider taxes would be by and large circular in a universal system.
We would, in essence, be paying providers for the provider tax that we use to support the
payment to providers. Repeal of the provider tax requires an additional $150 million in
replacement revenue.
Overall, we estimate that $344 million in current state Medicaid revenue would be applied to
Green Mountain Care. This is a substantial downgrade from the $637 million estimated in the
previous report. For more information about how existing Medicaid revenues change, see
Appendix F.
37

Green Mountain Care Taxes

Most private insurance premiums would be replaced by Green Mountain Care taxes with the
implementation of GMC. Vermont businesses would pay a payroll tax and each tax filer would
pay a public premium, an income tax based on their income and family size. Both taxes would
be directed entirely to the Green Mountain Care Fund.
Payroll Tax
The employer payroll tax would be levied at a rate of 11.5% on all Vermont businesses on their
qualifying Vermont payroll. Qualifying payroll is all payroll except wages for any individual
employee in excess of $200,000 with that amount adjusted annually for inflation. The tax would
not paid on behalf of any individual employee. Accordingly, employee age, residency, and
insurance status are irrelevant in calculating the tax. The tax would be deductible from federal
taxes.
We chose the payroll tax due to its simplicity, large tax base, and steady growth rate.
Businesses are easily able to calculate payroll and remit or withhold a variety of payroll taxes
today. This makes it potentially simple in contrast to a per employee fee, which would prompt
questions about how to count and characterize employees. The large base keeps rates lower.
The steady growth rate attempts to ensure predictable revenue growth over time.
We estimate the payroll tax would generate $1.51 billion in 2017 and grow annually. Our
annual revenue estimates are shown in Table 7 below.
Table 7: Estimated GMC Payroll Tax Revenue, 2017 2021
Year
Payroll Tax Revenue (Millions)

2017

2018

2019

2020

2021

$1,510

$1,542

$1,574

$1,606

$1,639

Self-Employed Exemption
The only exemption to the payroll tax would be an exclusion for the self-employed. Self
employed Vermonters would pay the public premium only, not the payroll tax. This is in
contrast to Social Security, which makes the self-employed pay both the employer and
employee share. We suggest this exemption to promote simplicity in administration of the tax
and keep the tax burden lower for the self-employed.
The payroll tax would be collected by the Vermont Department of Taxes. The Commissioner
would develop policies, procedures, forms, and regulations necessary to implement the tax.
Public Premium
The public premium is the primary individual tax we would recommend to support GMC,
replacing private insurance premiums for most Vermonters. The tax would be based on a tax
filers income and family size. The tax would be calculated as a percentage of Adjusted Gross
Income (AGI). This percentage is based on the tax filers AGI as a percent of the federal poverty
38

level (FPL). Taxpayers would use the number of personal exemptions (dependents) to
determine family size and FPL. Next, a percentage of income would be assigned for tax
liability.56
The recommended design of the public premium tries to balance three competing concerns.
First, the ACA waiver requires that the tax must be at least as affordable as the ACA for all
taxpayers at or below 400% FPL. The ACA measures the affordability of health care based on
the relationship between income and FPL, and the public premium as an FPL based income tax
is meant to mirror the federal affordability calculation. Second, the tax should take into account
ability to pay. Simply, taxpayers with more income by and large should pay more. Third, the tax
design acknowledges that insurance is currently a product where people of very different
income pay the same amount of money. The tax design balances these competing concerns by
creating a tax that meets the federal requirements and takes into account ability to pay without
being a general income tax, as the maximum tax is capped at the federal threshold for a high
value health plan, commonly known as the Cadillac Tax threshold. The public premium
calculation is discussed in more detail below.
The public premium is designed to create three types of taxpayers. First, we have a sliding scale
based on income. These taxpayers are on The Ramp. Second, we have taxpayers who pay the
maximum percentage of their income, the Maximum Percentage Payer. Third, we have
taxpayers who pay the maximum GMC tax, the Maximum Dollar Amount Payer.
The Ramp
In order to account for ability to pay, and meet federal affordability requirements, the tax
would be calculated on a sliding scale based on FPL up to 400% FPL. The minimum premium is
2.5% of AGI at 138% of FPL, starting where Medicaid eligibility ends. The ramp begins to climb
after 150% FPL and moves in a straight line from 2.5% of AGI at 150% FPL to 9.5% of AGI at
400% FPL. 400% FPL was selected as the end of the ramp to ensure that all Vermonters were
below the affordability threshold set forth by the ACA. By 2016, the ACA sets 9.66% of income
as affordable for health care at 400% FPL.57
Max Percentage Payer
The sliding scale stops at 400% of FPL, projected to be $102,220 for a family of four by 2017.
Taxpayers between 400% FPL and approximately $289,475 AGI pay 9.5% of income. While the
percentage stays the same, taxpayers with a higher income would pay more.

56

We would recommend changing the calculation for a single person. We would use the FPL for a family of 2 so
that the single person would pay slightly less. Stated another way, all families have at least two people for the
purpose of determining FPL. This would be done to minimize the change in cost for single person households who
otherwise would be exposed to disproportionate cost increases.
57
IRS Rev. Proc. 2014-62 at http://www.irs.gov/pub/irs-drop/rp-14-62.pdf.
39

Max Dollar Amount Payer

Taxpayers with income greater than approximately $289,475 AGI would pay a flat $27,500
maximum tax. This amount declines as a percentage of income for every dollar in income
beyond approximately $289,475. This $27,500 maximum GMC individual tax would be pegged
to the Cadillac Tax threshold.58
Figure 2 on the next page compares the Green Mountain Care public premium to the
affordability requirements of the ACA. This is done to demonstrate the cost of the tax
compared to the ACA affordability requirements and ensure that it meets federal affordability
requirements.

58

ACA 9001; IRC 4980I.

40

Figure 2: Public Premium Distribution Compared to ACA Silver Plan Premium Affordability

The red line is not what people have today. Instead, it represents what would happen if every
Vermonter bought a silver level plan (70% AV) in the Exchange. The green line is what
Vermonters would pay as a percentage of income under the public premium (94% AV).59
Overall, figure 2 demonstrates several important points about the distribution of the tax. The
system takes into account ability to pay as those who make more pay more in the case of 98.8%
of taxpayers. Also, while people would likely focus on the maximum tax liability potentially due,
the distribution of the tax is far less than the maximum amount for nearly all Vermonters. We
estimate that more than 74.5% of Vermonters would pay less than $5,000 in tax and nearly 96%
pay less than $15,000. Only 1.2 % of taxpayers, 4,349 households, would pay the maximum tax.
Table 8 sets forth the distribution of tax liability for the public premium.

59

The silver level plan is the benchmark for affordability for ACA waiver purposes. Comparisons to what
Vermonters pay today are in Chapter 7, which covers economic analysis.
41

Table 8: Distribution of Public Premium Tax Liability

Public Premium Distribution by Cost

Number of Households

<$5,000

% of Households

271,398

74.50

$5,000 - $10,000

54,532

14.97

$10,000 - $15,000

23,697

6.50

$15,000 - $20,000

7,002

1.92

$20,000 - $25,000

2,391

0.66

>$25,000

5,295

1.45

The tax is based on FPL, not solely income. Accordingly, larger families would pay less even if
they have the same income, as FPL is reduced for each additional dependent. This is consistent
with the subsidy calculations in the ACA and the general logic of tax filings, where larger
families are allowed to deduct more money for each dependent. This is different than the
typical logic of health insurance premiums where couples and families tend to pay more than
single or couple filers. Table 9 demonstrates this FPL effect within the public premium.
Table 9: Distribution of Public Premium by Income and Family Size60
Number of
Exemptions

Average

$242

$120

$0

$0

$0

$0

$152

$25,000 - $49,999

$2,475

$1,866

$1,389

$681

$207

$180

$1,682

$50,000 - $74,999

$5,724

$5,273

$4,302

$3,214

$2,808

$2,220

$4,396

$75,000 - $99,999

$7,873

$8,302

$8,075

$6,861

$5,561

$4,419

$7,312

$100,000 - $124,999

$10,276

$10,521

$10,714

$10,667

$9,640

$7,929

$10,345

$125,000 - $149,999

$12,727

$12,851

$12,924

$12,985

$12,793

$11,925

$12,848

$150,000 - $199,999

$16,854

$16,157

$16,325

$16,363

$16,786

$15,252

$16,344

$200,000 - $299,999

$27,500

$22,947

$22,668

$22,937

$23,935

$21,088

$23,197

$300,000 - $499,999

$27,500

$27,500

$27,500

$27,500

$27,500

$27,500

$27,500

$500,000 - $999,999

$27,500

$27,500

$27,500

$100,000,000 +

$27,500

$27,500

$27,500

$27,500

$2,279

$6,865

$6,551

$8,160

$5,757

$4,195

$5,285

AGI
Under $25,000

Average

60

The * symbol indicates a value of three or fewer taxpayers.

42

Tax Deductibility
The major tax goals of the system are to promote equity and maintain to the greatest extent
possible the value of the employer-sponsored insurance exclusion, which makes health care
premium spending exempt from federal and state income taxes and federal payroll taxes. A
payroll tax system enables employers contributions to remain tax exempt. Based on analysis of
applicable federal law and discussions with United States Treasury, the public premium would
be deductible for federal purposes on Schedule A as an income tax. This means that Vermont
taxpayers who itemize on their federal tax return could reduce their federal tax liability for
public premium paid subject to general federal limitations on itemized deductions. For
example, a Vermonter charged the maximum public premium who itemizes at the federal level
and is in the highest federal tax bracket could see a 39.6% reduction in their GMC effective
public premium tax liability.
Not all Vermonters itemize their deductions. On average, approximately a third of Vermonters
itemize and these tend to be the highest income Vermonters. The system is designed to
maintain equity and protect against the loss of the employer-sponsored insurance exclusion in
the following way.
First, the sliding scale is designed to keep public premium liability as low as possible for nonitemizers who tend to be low and middle income. Second, the deductibility of the public
premium on Schedule A mimics the employer-sponsored insurance exclusion by making health
care spending tax preferred for higher income Vermonters. The ultimate test of the efficacy of
this approach is to measure total federal taxes paid with and without GMC. Overall, we
estimate that Vermonters would pay $191 million less in federal income taxes under GMC than
the ACA. Furthermore, even after accounting for increased federal payroll taxes due to higher
wages, Vermonters would pay $159 million less in federal taxes under GMC than under the
ACA. In this way, the strategy succeeds in addressing the legitimate concern about forfeiting the
value of the employer-sponsored insurance exclusion set forth in I.R.C. 106. The resulting tax
liability for Vermonters after GMC implementation is discussed more fully in Chapter 7 of the
report.
Exemptions, Reductions, and Credits
As indicated above, the public premium would be compulsory unless an individual qualifies for
a specific tax exclusion, reduction, or credit. It is important to note that taking employersponsored insurance does not generally relieve a taxpayer from the tax. In this way, the GMC
tax mirrors the distinction between public and private schools. People are welcome to send
their children to private schools, but this does not reduce their property taxes. Similarly,
employers would be welcome to offer insurance within GMC and employees could take it;
however, this generally would not change an employees tax liability.

43

While the general rule is that everyone would pay the tax, some Vermont residents would be
either excluded from the tax, charged a reduced tax liability, or receive a credit. For example,
Medicare enrollees would be exempt from the finance provisions of Green Mountain Care.
Overall, these special populations include Vermonters with coverage from Medicare, TRICARE,
and certain retirees.
Table 10: Populations Exempt from Financing or Eligible for a Credit
Description

Primary
Coverage

Contribution
to GMC

Considerations

Seniors (over age

65)

Medicare

None

Medicare Supplemental Insurance would

remain available. Current Medicare wrap
programs, such as VPharm stay the same

Individuals with
disabilities (over
24 months)

Medicare

None

Same as above.

Non Medicare
Retirees, excluding
state and teacher
retirees

ESI

None

GMC creates a ten year window where nonMedicare retirees with employer coverage are
exempt from GMC coverage and taxes.

Active duty
military61

TRICARE

None while on
TRICARE

GMC coverage is suspended. GMC is available

as soon as the individual drops or is no longer
eligible for coverage. Individuals who are
eligible for enhanced benefits from Medicaid
would maintain enhanced benefits through
GMC

National Guard

TRICARE, while
on active duty.

None while on
TRICARE

Vermonters with the Guard would have GMC

coverage while not on active duty & can
suspend that coverage during the time period
they are on active duty.

Veterans

VA facilities
and new
insurance, if
applicable

None while
using VA
insurance

New VA Insurance provisions expires in August

2017. Veterans may use the VA Hospital for
services as well, but are not required to under
GMC.

Military:

Appendix F includes a description of the tax credit mechanism to be used to ensure that
members of special populations comply with Green Mountain Care tax laws.

61

In order for TRICARE to be primary coverage, a state statutory change is needed. This is because, under federal
law, TRICARE is always secondary, except to Medicaid.
44

Revenue Collection
The public premium would be collected by the Vermont Department of Taxes. The
Commissioner would develop policies, procedures, forms, and regulations necessary to
implement the tax. We would recommend that the Commissioner make these rules consistent
with existing income tax withholding and payment laws and regulations. Specifically, the public
premium ought to be subject to mandatory paycheck withholding and estimated payments,
similar to the Personal Income Tax. This mirrors the current employer-sponsored insurance
exclusion for taxpayers and ensures proper cash flow for the program.
Out-of-Pocket Costs
Like today, Green Mountain Care would feature cost-sharing. Vermont residents would be
required to pay co-payments at the point of service. The recommended plan AV is 94%,
meaning that on average the plan would cover 94% of expenses and leave 6% to be covered by
the resident at the time of care. This is an important aspect of the system financing, even if it is
not a public revenue stream.
In 2017, total out-of-pocket costs are estimated at $187 million, a $258 million reduction from
the ACA. The out-of-pocket savings would increase annually. Table 11 sets forth aggregate outof-pockets costs from 2017 to 2021.
Table 11: Estimated ACA and GMC out-of-pocket Spending, 2017 2021 (Values in Millions)
Year

2017

2018

2019

2020

2021

ACA

$445

$465

$491

$517

$543

GMC

$187

$167

$173

$190

$185

Change

-$258

-$298

-$318

-$327

-$358

The total out-of-pocket cost yields an average estimated out-of-pocket cost of $810 per family.
This is a reduction of $700 per family. Yet, it is critical to understand that out-of-pocket costs
are not distributed equally. Many individuals and families use very little health care in any given
year. Others use a lot of health care during any given year. Table 12 demonstrates the
distribution of GMC plan out-of-pocket costs by decile of utilization.

45

Table 12: Estimated Distribution of GMC Out-of-pocket Costs by Decile for 2017
Range of Out-ofpocket Costs

Percent of Members

$0-$100

31%

$101-$200

19%

$201-$300

10%

$301-$400

6%

$401-$500

4%

$501-$600

3%

$601-$700

3%

$701-$800

3%

$801-$850

20%

Beyond its effect on individuals, we expect that Green Mountain Care would reduce health care
providers uncompensated care. Individuals who are uninsured, or who are responsible for
paying a deductible or coinsurance, may owe a balance to their health care provider for care
they received. If an individual does not have sufficient resources to pay an amount owed, a
health care provider may waive the fee and write off the claim to charity care. In other cases,
the provider may write off an uncollected amount to bad debt. Charity care and bad debt
together are referred to as uncompensated care. One study of hospital uncompensated care
found that 75% of uncompensated care was incurred by individuals with family incomes below
100% FPL and 97% of uncompensated care was incurred by individuals with family incomes
below 300% FPL.62
Under Green Mountain Care, all Vermont residents would have comprehensive health coverage
with low cost-sharing requirements. Individuals who currently have high cost-sharing
requirements through an employer health plan would no longer incur large health care debts.
The reduction in individuals out-of-pocket costs for health care would in turn reduce the
amount of uncompensated care experienced by Vermont health care providers. Providers and
the designated entity should monitor whether the reduction in uncompensated care or bad
debt occurs in GMC and work with the Green Mountain Care Board to determine whether this
should impact provider rates.

Balance Sheet
Table 13 applies the cost and revenue estimates and reveals a difficult financial picture for
GMC. The system would nearly balance for the first three years, including surplus in years 1 and
62

Weissman, J.S., Dryfoos, P. and K. London, Income levels of bad-debt and free-care patients in Massachusetts
hospitals, Health Affairs 18:4 (1999).
46

2. Yet, the system would fall into deficit in year 4 and 5. This affirms the primacy of cost
containment in a publicly financed system. Any publicly financed system where expenditures
rise faster than revenue would require tax increases or new tax sources in future years. Our
best estimates for cost containment are that we can narrow the gap between revenues and
expenditures to a greater degree than in todays system. However, health care costs, even at a
4% trend, would continue to rise at a higher rate than revenues. This is true to an even greater
extent in todays world, which is why premiums increase every year more than wages or
inflation. Even with our best estimates of cost-containment, we would need to accept some
increases in tax rates in the same way that we accept increases in insurance premiums today.
It is important to note that this balance sheet does not include a phase-in of the payroll tax,
which is a policy priority of the Governors. See Appendix F-2 for discussion of the phase in.
Table 13: GMC Balance Sheet63
Year

2017

2018

2019

2020

2021

-4,579

-4820

-5,001

-5,177

Spending
Cost of GMC Coverage and Operations

-4,340
Revenue

Federal Funding
Federal Medicaid Match

1,310

1,364

1,413

1,445

1,505

Federal ACA Waiver Funding

106

118

122

125

132

State Funding
State Medicaid

344

341

350

358

366

New Revenue Needed

-2,580

-2,756

-2,935

-3,073

-3,174

Payroll Tax

1,510

1,542

1,574

1,606

1,639

Public Premium

1,247

1,306

1,359

1,372

1,381

GMC Fund Fiscal Position

177

92

-2

-95

-154

63

The balance sheet changed slightly since Governor Shumlins announcement on December 17. Changes reflect a
technical correction to State Medicaid revenue and a $1 million change to federal ACA funding for both 2020 and
2021. These changes impact the new revenue needed and the GMC Fund fiscal position.
47

Chapter Seven: How would public financing impact Vermont businesses

and families?
Coverage, finance, and cost containment would affect the distribution of health care costs from
the ACA to GMC. In this chapter, we describe the potential changes to health care spending by
employers, local and state governments, individuals, and families. Embedded within these
figures are projected income changes and changes in tax liability. Also, we discuss savings
estimates based on the ability to hold GMC costs below projected national growth trends
beginning in 2017.

Effect on Employers
The economic modeling compared the projected health care spending of Vermont firms under
the ACA to their projected health care spending under GMC. Today, health care spending varies
substantially by firm. In Green Mountain Care, all firms would pay a uniform 11.5% payroll tax.
The payroll tax would change the level and distribution of health care spending for Vermont
firms.
Overall, as modeled, GMC would increase health care spending by Vermont employers $109
million from $1.595 billion to $1.704 billion. On average, nearly all private firms would pay
more under this design of GMC. The largest aggregate increase would occur in Vermonts
smallest firms, those with fewer than 10 employees. The largest per employee increase would
occur in small firms with between 10 and 49 employees. In contrast, public employers would
spend less under GMC than under the ACA. We estimate that the federal government saves
money as GMC enrollees choose to drop insurance rather than pay for both federal insurance
and GMC taxes. We assume military insurance is unchanged.

48

Table 14: Employer Spending on Healthcare (Total $ in Millions, per employee in $)64
Firm Size

ACA
Spending

Per Employee
ACA Spending

Total GMC
Spending

Per Employee
GMC Spending

Total
Change
from ACA

Per
Employee
Change
From ACA

Under 10

242

1,005

437

1,819

196

814

10-49

121

3,013

174

4,337

53

1,324

50-99

56

3,580

70

4,467

14

887

100-249

90

4,940

97

5,312

372

250-500

89

5,279

87

5,164

-2

-115

500-999

75

5,699

77

5,851

152

1000-4999

280

5,733

294

6,004

13

271

5000+

92

5,422

98

5,744

322

Federal

46

3,946

-46

-3,946

State

183

7,502

111

4,578

-71

-2,924

Local

66

4,374

62

4,088

-4

-286

Municipal

205

6,178

146

4,380

-60

-1,798

The distribution of health care spending by employers today depends on the firms choice to
offer coverage, the number of employees that enroll in employer coverage, the value of plan
benefits, and in some cases the health of the workers. Accordingly, the impact of GMC on any
specific employer depends greatly on whether the firm offers insurance today. Most classes of
firms that offer health insurance today would spend less in GMC than under the ACA. This does
not hold true for Vermonts largest firms, those with more than 1,000 employees.

64

For the employer tables, the employer category local represents local government employees. The municipal
category represents education employees. The labeling was kept this way to ensure fidelity with the underlying
modeling output documents.
49

Table 15: Employer Spending on Healthcare for Firms Offering Prior to GMC
(Total $ in Millions, Per Employee in $)
Firm Size

Total ACA
Spending

Per Employee
ACA Spending

Total GMC
Spending

Per
Employee
GMC
Spending

Total
Change
from ACA

Per Employee
Change From ACA

Under 10

242

5,286

208

4,542

-34

-744

10-49

121

5,994

93

4,578

-29

-1,416

50-99

56

5,050

50

4,474

-6

-576

100-249

90

5,363

89

5,290

-1

-73

250-500

89

5,640

84

5,306

-5

-334

500-999

75

6,160

74

6,086

-1

-74

1000-4999

280

5,845

289

6,030

186

5000+

92

5,503

96

5,735

232

Federal

46

3,946

-46

-3,946

State

183

8,942

101

4,929

-82

-4,013

Local

66

5,916

50

4,492

-16

-1,424

Municipal

205

7,268

128

4,521

-78

-2,747

Firms that do not offer insurance under the ACA would see a much larger change under GMC.
Overall, firms that do not offer insurance incur $393 million in new expense under GMC. The
majority of this cost ($230 million) would be paid by businesses with fewer than ten employees.
More than three quarter of this expense ($312 million) would be paid by firms with fewer than
50 employees.

50

Table 16 Employer Spending on Healthcare for Firms Not Offering Prior to GMC
(Total $ in Millions, Per Employee in $)
Firm Size

Total ACA
Spending

Per Employee
ACA Spending

Total
GMC
Spending

Per Employee
GMC Spending

Total
Change
from ACA

Per
Employee
Change
From ACA

Under 10

230

1,179

230

1,179

10-49

82

4,094

82

4,094

50-99

20

4,451

20

4,451

100-249

5,561

5,561

250-500

3,087

3,087

500-999

2,952

2,952

1000-4999

4,649

4,649

5000+

6,355

6,355

Federal

State

11

2,748

11

2,748

Local

12

2,942

12

2,942

Municipal

18

3,582

18

3,582

The new and large cost placed on small businesses reveals just how critical it is to offer a
transition strategy for these businesses. Simply put, many small businesses pay little or nothing
today. They need a strategy to transition to GMC.
One additional effect of GMC on employers would be how it could change the amount paid by
employers to their employees. We assumed that employers that pay less under GMC than
under the ACA would gradually pay their employees more in wages.65 Additional wages would
have a major impact on Vermont households, which is discussed in the next portion of this
chapter.66

Impact on Vermont Households

GMC would change the health care spending, income, and taxes paid by Vermont households.
Overall, Vermonters would receive more in wages under GMC. Additional wages would boost
income and consumption of goods and services. In turn, increased wages and consumption
65

See wage stickiness assumptions in Appendix C.

Our assumptions around wage stickiness mean that some firms would collect considerable savings that are not
immediately passed back to employees via higher wages. Additional macroeconomic analysis is needed to
determine the impact of this unallocated cash on Vermonts firms and the Vermont economy. Additionally, firms
that pay more under GMC than under the ACA would be forced to adjust to changed circumstances.
Macroeconomic analysis is needed to determine the effect of this on the economy.
66

51

would increase taxes paid by households. Ultimately, we are focused on net family income,
which measures family resources available after all health care spending, wage effects, and
taxes paid described above occurs.
Net Family Spending
Overall, we estimate that over time Vermont residents would have higher net family income on
average under GMC. This is due to higher income, lower health care costs, and lower federal tax
liability under GMC than without GMC.
Table 17: Average Change in Net Family Income from ACA to GMC, 2017 2021

Change in Net Family Income

2017

2018

2019

2020

2021

-460

310

1,210

1,450

1,880

The public premium amount would change based on income and family size. Accordingly, net
family income would change at various income levels. Table 18 on the next page sets forth
average net family income changes by income class. Families with incomes of less than
$150,000 per year would on average see higher net family income under GMC. Families with
incomes of more than $150,000 per year would on average see decreased net family income in
GMC.

52

Table 18: Average Change in Net Family Income from ACA to GMC by Income Class, 2017
Average Change in Net Family Income by Income Class
Income Class
<$10000

Average Change in Net Family Income

1,203

$10k - $19,999

952

$20k - $29,999

909

$30k - $39,999

2,012

$40k - $49,999

1,677

$50k - $74,999

2,645

$75k - $99,990

2,452

$100k - $149,999

739

$150k - $249,999

-2,120

$250,000 +

-5,841

The table above tries to answer the question of whether Vermont household are better off
economically under GMC than under the ACA. Table 19 on the next page depicts all the
different component parts of that economic calculation. For each income class, you can see the
change in health care spending, change in income, and change in tax liability that ultimately
drives the net family spending result.

53

Table 19: Changes in Net Family Income by Income Class, including Health Care Spending, Wage Effects, and Tax Changes, 2017

ACA
Income
Class

GMC

Number
of
Families

Average
ACA
Out-ofpocket

Average
ACA
Premium

<$10,000

46,919

870

369

$10,000$19,999

53,288

808

$20,000 $29,999

45,161

$30,000 $39,999

Total
ACA
Cost

Average
GMC
Out-ofpocket

Average
GMC
Spending on
Private
Insurance

Average
GMC
Individual
Tax

Average
GMC
Income
Change

Average
Change in
Federal Tax

Average
Change in
State Tax

Average
Change in
Net Family
Income

1,239

464

23

488

55

-17

1,203

580

1,389

829

32

53

537

48

12

952

725

813

1,538

713

136

410

727

90

909

36,596

1,218

1,489

2,706

558

66

1,087

1,205

170

18

2,012

$40,000 $49,999

29,495

1,332

1,714

3,046

389

110

1,980

1,289

150

29

1,677

$50,000 $74,999

55,155

1,707

3,482

5,189

1,080

268

3,475

2,639

274

86

2,645

$75,000 $99,999

37,671

2,081

4,843

6,924

894

454

5,971

2,821

-89

64

2,452

$100,000 $149,999

35,929

2,175

5,010

7,185

847

424

9,359

2,636

-1,564

16

739

$150,000 $249,999

15,841

2,152

5,179

7,330

842

744

14,466

2,137

-4,506

41

-2,120

$250,000+

8,261

2,368

5,756

8,124

872

182

21,877

828

-8,043

-94

-5,841

54

The overall economic picture in Table 19 shows the merits of the public premium.
Overall health care costs would decrease for low and middle income Vermonters. This,
in tandem with wage growth, would increase net family income exceeding any
additional tax burden. Higher income Vermonters would have losses minimized by the
favorable tax treatment of the public premium as an itemized deduction.

Trend and Cost Containment

Cost containment is a key component to the economic viability of GMC. The goal is for
the GMCB and designated entity to create a regulatory environment that would produce
a sustainable health care spending trend that comes in under a maximum annual
growth rate. Specifically, the GMCB could work with the designated entity and provider
community to hit a target health care growth rate of not more than 4% from 2017 to
2021. This target trend is compared to our benchmark, the National Health Expenditure
(NHE) trends published by the Office of the Actuary at the Center for Medicare and
Medicaid Services. CMS projects health care expenditures to grow, on average, 5.8 and
5.1 percent annually for Medicaid and Commercial populations from 2017 to 2021.
Hitting this trend target would be the method for saving money in GMC. Each year costs
stay at or below the trend, GMC would save money compared to the status quo. This
trend approach is markedly different than the approach used in the universal health
care reports published by Dr. William Hsaio in 2011 and the University of
Massachusetts/Wakely Consulting in 2013. These reports quantified administrative
savings that occurred upon implementation and reduced the revenue needed to
operate the program from the start date of the program.67 Specifically, the Hsaio report
booked $580 million in administrative savings for the first year of the program, and the
UMASS/WakeIy report identified $122 million in reductions delivered through lower
provider rates. In contrast, we accrue savings over time as Vermont follows a more
sustainable fiscal trajectory. We consider this approach most prudent as it allows health
care providers time to adjust to the new coverage, finance, and regulatory environment
and the flexibility to determine how best to manage their costs. This would minimize
dislocations for the provider community, their workers, and patients.
Overall, we estimate that GMC would save $378 million over the first five years if it hits
the 4% trend target as opposed to growing at the benchmark rate.

67

2013 UMass-Wakely Report:

http://hcr.vermont.gov/sites/hcr/files/2013/Health%20Care%20Reform%20Financing%20Plan_typos%26f
ormatting%20corrected_012913.pdf ; Dr. Hsaios report:
http://www.leg.state.vt.us/jfo/healthcaresystemdesign.aspx

55

Table 20: Anticipated GMC Savings Based on 4% Trend, 2017 2021

Year

GMC Cost at NHE

Growth

GMC Cost at 4%
Trend

Difference

2017

4,263

4,263

2018

4,512

4,501

11

2019

4,806

4,741

65

2020

5,042

4,921

121

2021

5,277

5,096

181

Total Savings

378

The trend is set at four percent, but overall spending does not grow at exactly this
amount due to changes in population. Each year, some people would migrate from
employer-sponsored insurance to Green Mountain Care. Other people would migrate
from Green Mountain Care to Medicare. Cost growth estimates exceeds trend the first
two years as more people move into GMC from their employer-sponsored insurance.
Cost growth estimates are below trend in the fourth and fifth year as more people age
and are covered by Medicare.

Retirees and Health Care

Vermonts State Treasurer administers the retirement systems for state employees and
teachers. Vermont must account for both the current and future projected cost of these
benefits.68 These liabilities are known as Other Post Employment Benefits (OPEB)
liabilities. We estimate that Green Mountain Care has the potential to decrease OPEB
liabilities substantially.
As described in Chapter 3, all non-Medicare state and local government retirees that are
Vermont residents would receive GMC as primary coverage. Accordingly, the States
projected future OPEB liability would be reduced as the health care costs of resident,
non-Medicare retirees transition from the retirement system to Green Mountain Care.
The retirement system would be responsible for out of state retirees, Medicare retiree
benefits, and any additional benefit to retirees beyond GMC that the retirement system
chooses to offer. At 94% AV, we expect that most resident, non-Medicare liability would
be eliminated. OPEB liability would likely be substantially reduced even under 87AV and
80AV benefit scenarios.

State Revenues
We estimated that increased income due to GMC would stimulate spending. This would
in turn result in increased state tax revenue. Specifically, we estimated that the State of
68

States are required to report Other Post Employment Benefits (OPEB) liability per Government
Accounting Standard Bulletin (GASB) 45. Specifically, states are required to report projected non-pension
costs related to post-retirement medical, pharmacy, dental, vision, life, long-term disability and long-term
care benefits.

56

Vermont would collect $34 million in additional state tax revenue in 2017, rising
annually thereafter. We did not allocate that increased revenue to GMC. Instead, we left
the allocation of that increased revenue as a policy choice for a future Administration
and Legislature.

Conclusion
Overall, the economic modeling of Green Mountain Care demonstrates promise and
peril. On average, Vermont households would benefit, but this benefit takes time to
materialize. Households with income below $100,000 would benefit the most. The
public premium shows the ability to tax based on the ability to pay while minimizing
sticker shock to higher income households through tax deductions available through the
federal income tax code. Businesses would pay more overall, but the firm specific
results depend heavily on whether the firm offers insurance today.
Based on our analysis, the economic shock and transition issues were too great for us to
recommend that Vermont proceed with public financing at this time. In the event Green
Mountain Care is considered in the future, we would recommend additional
macroeconomic analysis to understand business sector effects, job gains or losses, and
the overall impact on Vermonts economy.

57